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Gift cards: A present that can last forever

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With the holiday season ending, it is time for many to redeem their holiday gift cards or gift certificates. Gift certificates and gift cards have continued to increase in popularity. According to the Retail Gift Card Association, shoppers continue to consider gift cards a safe, versatile gift.

In 2004, the Washington Legislature enacted a gift certificate statute. The statute prohibits “acts and practices of retailers that deprive consumers of the full value of gift certificates, such as expiration dates, service fees, and dormancy and inactivity charges, on gift certificates (or gift cards).”

When enacting the statute, the Legislature also directed that the courts liberally construe the law to benefit consumers. Thus, merchants that elect to offer gift certificates or gift cards should make themselves aware of the limitations placed upon their ability to regulate their cards or risk running afoul of the statute.

The statute provides that any gift card agreement between the merchant and the card holder is invalid, if the agreement contravenes the statute. Thus, any gift card terms that does not comply with Washington’s statute are unenforceable against the card holder.

If the merchant refuses to comply with the statute, the card holder can bring a civil action, whether in small claims court or in superior court. An ongoing concern for merchants could be card holders seeking to assert claims under Washington’s Consumer Protection Act, which could allow disgruntled card holders to recover their actual damages, punitive damages, and legal fees and costs.

As for consumer protection, the statute generally makes it unlawful for any person or entity to issue a gift certificate that contains an expiration date; any fee, including a service fee; or a dormancy or inactivity charge. The statute also provides that a gift card is valid until redeemed or replaced. However, a card issuer is not required to replace a lost or stolen gift certificate.

There are some exceptions to the above-stated consumer protections. For example, an expiration date is lawful, if the gift certificate was issued pursuant to an awards or loyalty program, or in other instances where no money or other thing of value is given in exchange for the gift certificate. However, the expiration date must be disclosed clearly and legibly on the gift certificate.

A dormancy or inactivity charge is also lawful, if a statement is printed on the gift card stating the amount of the charge, how often the charge will occur, and that the charge is triggered by inactivity of the gift card.

However, dormancy or inactivity charges can only occur when the remaining value of the gift card is $5 or less, the charge does not exceed one dollar per month, and the charge can only be assessed when there has been no activity on the gift card for 24 consecutive months. After a dormancy or inactivity charge is assessed, the remaining value of the gift certificate is redeemable in cash on demand.

The statute does provide some protections for merchants. It provides that the card seller is not required to redeem a gift certificate for cash; replace a lost or stolen gift certificate; or maintain a separate account for the funds used to purchase the gift certificate.

The statute also states that it did not create a fiduciary or quasi-fiduciary relationship between the beneficiary of the gift card and the card issuer. It also states that the card issuer is under no obligation to pay interest on the value of a gift certificate.

Further, the statute states that if a purchase is made with a gift certificate for an amount that is less than the value of the gift certificate, the issuer may elect to make the remaining value available in cash or as a gift certificate, at the option of the issuer, unless the amount on the certificate is less than $5. In that case, the issuer must redeem the card for cash for its remaining value upon the demand of the card holder.

Gift cards and gift certificates can continue to be an effective tool for merchants looking to increase sales. However, merchants may want to proceed with caution. In today’s climate of escalating litigation, not knowing the rules for gift cards could expose an unwary merchant to unexpected liability and litigation.

Brian A. Walker represents businesses and individuals in commercial, business, employment, and real estate related litigation and transactions from the Wenatchee office of Ogden Murphy Wallace P.L.L.C.